Start-ups: From unicorns to flying cars

Of People and Numbers - Eastern Europe in your pocket.

The herd of start-ups to the east is growing. A handful of unicorns – start-ups with market valuations of $1 billion or more – are trotting through Central and Eastern Europe leading an increasingly successful, local start-up scene. Companies such as LogMeIn, which started nearly 15 years ago in Budapest and is now listed on the Nasdaq in New York, or Prezi, also from Hungary, which aims to displace Microsoft’s PowerPoint, are already well established on the global stage. New ideas are in the wings, waiting for the right moment. In Bratislava, for instance, AeroMobil engineers are tinkering with a flying car that they hope will be market-ready by 2020. Back in 2013, Ionuț Budișteanu from Romania went so far as to challenge Google with his version of a self-driving car. He was only 20 years old at the time.

An estimated 30,000 successful start-ups in Central and Eastern Europe are working on their business ideas. The majority are in the tech sector, but some are social entrepreneurs. How is that possible, you ask? Does entrepreneurial innovation in the newer EU member states owe its success to a more fertile ecosystem there? Or are the successful examples simply outliers that obscure serious deficiencies in the local business environment? The answer is both.

“Central and Eastern Europe, whose economies gained significantly more momentum in 2017 than those of the old EU, is to some extent turning into a victim of its own success in this respect. The region is still not as rich as its neighbours to the west, and in the race for funds most of the region is no longer poor enough either.”

The region’s greatest asset is its people – and their career choices. Some 200,000 young women and men from IT-relevant disciplines such as computer science, mathematics and engineering leave Eastern European universities each year. 40,000 of them in Poland alone. They provide a critical mass of clever minds as well as sufficient personnel for the information and communication technology sector in those countries. Romania’s ITC sector, and in particular software solutions, already accounts for nearly six per cent of that country’s overall economic output. Young entrepreneurs can get the quality education they need to realise their ideas, but money is scarce. Only €1.6 billion in risk capital flowed into Central and Eastern Europe in 2016. Yet big tech firms still want to tap the lively entrepreneurial spirit there. Google opened its third European campus, a hub where entrepreneurs can gather to develop and network, in Warsaw after iterations in London and Madrid.

“Some 200,000 young women and men from IT-relevant disciplines such as computer science, mathematics and engineering leave Eastern European universities each year. 40,000 of them in Poland alone.”

The newer EU member states have a lot of catching up to do when it comes to using their heart, their head and technology to alleviate social problems. Digital social businesses are as successful as they are rare, even though the sector that comprises companies with a social purpose is growing as a whole – albeit from a low level. Public funds, which are an important source of capital, are less liquid in Warsaw and Bucharest than in Western Europe. About 5,000 of all registered companies in Poland classify themselves as social businesses, while much-smaller Austria is estimated to have between 1,200 and 2,000 such enterprises. And yet Central and Eastern Europe, whose economies gained significantly more momentum in 2017 than those of the old EU, is to some extent turning into a victim of its own success in this respect. The region is still not as rich as its neighbours to the west, and in the race for funds most of the region is no longer poor enough either.

Of People and Numbers – Eastern Europe in your pocket

Fourteen years have passed since the European Union set off towards the east. The initial euphoria first gave way to day-to-day life and has now turned into disillusionment on both sides. In some places people have become or remained strangers, despite visible and hidden relationships, and personal, official and business relationships. Despite the numerous similarities and the value chains that now know no borders. And sometimes precisely because of them.

Head Count aims to highlight the political, economic, cultural and social realities of life in the newer members of the EU and the accession states of South-Eastern Europe on a small scale and compare them to Western European realities, at least as they appear in Austria. Are the two really always miles apart? When does the view from above fall short?

When preconceptions are put aside, a different world emerges. Head Count brings this world to you in images, figures and words. A monthly serving of Eastern Europe. Delivered to your smartphone each month.

Sources for Start-ups: From unicorns to flying cars
Eurostat
European Commission
World Bank
OECD
European Digital City Index
Financial Times
Venture Beat